In telecoms, Nigerians are being dazzled almost every other day by new innovations and sales gimmicks that recognise the consumer as king. And this is not limited to mobile telephony. The fixed wireless and wireline service providers, Internet and other ancillary service providers have joined in giving Nigerians more sophisticated products at better prices. They have come in names that Nigerians once only got to read about in foreign journals: multimedia messaging service (MMS), Voice over Internet Protocol (VoIP), mobile internet, and mobile phone banking. It is no longer strange to see mobile phone calls being advertised at call centres for N10 per minute!

These innovations have piggybacked on the strength of the operators launching service in many more towns and cities, with the highways and communities straddling them getting signals, subscriber numbers growing in leaps, and the country earning the sobriquet as the fastest growing telecoms market in Africa. At the last count — this could get tricky, as the numbers keep changing every month — there were at least 12 million active telephone lines in the country. But that number depends on whom you are reading. And the number is very significant.

At the moment, Africa has over 80 million mobile phone subscriptions. It took a little over ten years to sign up that number of subscribers. Launching mobile phone service seven clear years after the first mobile phone call was made in Africa, Nigeria now has over 14 per cent of total subscription on the continent. If trends are maintained, and investment in infrastructure continues, Nigeria could have over 20 per cent of all subscriptions on the continent.

It is still early days yet with regards to these improvements and innovations. But they are catching on, and are becoming unique selling points for some of the operators. Also, the profile of the industry is growing as the operators expand, and some operators that momentarily went out of business are doing comebacks. They have all contributed to the feeling that the only path open to the industry is growth. That is why Ernest Ndukwe, vice chairman of the Nigerian Communications Commission, at this year’s Telecoms Summit, said there would be ten million new subscribers this year. This will bring total subscriber figure to 20 million.

This is a great leap forward by any measure. But is it achievable or has the NCC become quite starry-eyed following its galloping success so far?

Unending possibilities
Industry operators are positive that the target set by Mr. Ndukwe would be met, with some caveat, qualified in a big if.

Titi Omo-Ettu, managing partner of Executive Cyberschuul, a telecoms training institute, says the target could even be surpassed, but some variables need to be right.

“Precisely what the delegates requested (at this year’s Telecoms Summit) from government include improvement in public electricity supply, reduction in duty rates on telecommunication imports, prioritisation of ICT in government policy thrust, emphasis of service delivery on customer satisfaction, capacity building, actualisation of the WiN project, enactment of antitrust legislation, privatisation of NITEL and reduction in multiple and provocative taxes across various strata of governments.”

Ticking these variables off one after the other, the impression one gets is that the set target cannot be achieved. Take, for instance, public electricity power supply. There is still a thick haze surrounding the agency concerned with supplying electricity, and it may require several years for the behemoth that is now holding the assets of the power company to be unravelled. While this is going on, telecoms operators will keep providing their power needs.

Reduction of duties on telecoms equipment and prioritisation of ICT in policy thrust are not less different in their importance to achieving the target. Understandably, the telecoms sector has achieved beyond the projection set by government, and in its (government) reasoning, it is no longer a sector that requires concession. Even now, some government functionaries are putting out the word that telecoms companies should pay more taxes. And with their declared financial results of the companies, especially MTN Nigeria showing positive income flow, there have been more strident calls for higher taxes to be imposed. Lagos State Government has been involved in several altercations has the Government is hiding under several guises to impose new, or increase taxes.

Privatisation of NITEL is bogged down in a maze few understand, and no one can predict with any accuracy how it will end up. Although no longer of strategic importance as it was before many companies laid their transmission infrastructure, its privatisation could lead to further investment in the sector. Even without the expected investment from NITEL’s privatisation, the industry will grow anyway. Many operators, especially the private telecoms operators, are beginning to position themselves to receive funding, from both onshore and offshore financial institutions.

Still on taxes and levies, the several layers of bureaucracy they have to wade through to get right of way in laying fibre optic cable bog down some companies. And the problem was recently compounded in Lagos State with the creation of new local councils. One operator, speaking under condition of anonymity, said they had to pay the commissioner of one state about N40 million to get the right of way, and that is in addition to other graft disguised as gifts that are demanded form telecoms companies when they are setting up their networks.

With all these problems, is the country not reaching a point where growth will level off, and may even start declining? The experience elsewhere in Africa, however do is not support such a tapering off of growth, though I could be argued that, as in most things, Nigeria’s case is rather unique.

In one such research, the absence of the variables that engender growth have been responsible for the uptake of mobile phone subscription on the continent. One of the most recent is that backed by phone giant, Vodafone. The report, supported by Centre for Economic Policy Research, stated among others, that even in the absence of public electric power supply, mobile phone subscription has the highest growth rate in the world; Nigeria’s growth rate was put at 100 per cent.

The report also stated that “mobile telephony has a positive and significant impact on economic growth, and this impact may be twice as large in developing countries as in developed countries. A developing country, which has an average of 10 more mobile phones per 100 population between 1996 and 2003, had 0.59 per cent higher GDP growth than an otherwise identical country. Fixed and mobile communications networks, in addition to the openness of the economy, the level of GDP and other infrastructure, are positively linked with Foreign Direct Investment into Africa and the impact of mobile telecommunications has grown in recent years.

“Sharing of mobile handsets is extensive in poor, rural communities and people at all income levels are able to access mobile services, either through owning a phone or using someone else's. 97 percent of people surveyed in Tanzania said they could access a mobile phone, while only 28 percent could access a landline. Gender, age, education, income or the absence of electricity does not seem to constitute barriers to access.”

Many Nigerians would contest the conclusion of the report on economic growth and the impact on business. And that is because they have quickly gotten used to the phones being available that even that is being taken for granted.

Growth, and more growth
That in only four years, there are at least 12 million mobile subscriptions, over two million fixed subscriptions, and many people having access to the Internet. The penetration of the latter has been remarkable.

Previously limited to tech savvy and corporate level clients, Internet has moved from being an elite service to readily available, even for very young people. Cybercafes have proliferated to about 4,000 and are still growing as more bandwidth become available. Although no study has been done, there may exist a link between growth in the number of phone subscribers and Internet (access) use. Access cost for surfing the net has dropped considerably, and cybercafes that were recording low customer turnout, and were predicted to extinct, are bursting with students chatting for hours on end. Even older customers are not left out as the value of the Internet increases for some.

The spread of cybercafes has accelerated the access Nigerians have to voice over IP. As it is with other kinds of data, no figure is available for VoIP use. Deepak Sharma, MD of DirectOnPc, leading Internet Service Provider in the country, says VoIP accounts for a greater percentage of the income of the company. And it is the same for many cybercafes, where international calls are priced at about 30 per cent of what telecoms companies bill.

The liassez-faire regulation the Nigerian Communications Commission has over VoIP, and the recent launch of IP wholesale service by NITEL would combine to make this service more available. So also are factors that would lead to faster phone take up being put in place. Telephone transmission infrastructure is being set up at a scale never seen in the country. The policy of the NCC, though criticised then, that operators should not share facilities for at least one year, is starting to yield results as more capacity is added to the network faster than they are taken up. A finger cannot be put on the installed capacity of the operators, a significant evidence of capacity in the system is that complaints over call completion have dropped, just as quality of service has improved somewhat though the onset of the rains has come with glitches on the networks. Can it get better?

It will, with the expected investment that would go into funding telecoms this year.

“The size of funding required depends on variables such as the type of technology to be deployed, source of equipment and technology, and the CAPEX (capital expenditure) strategy of each operator. However we expect industry CAPEX to be in excess of $1billion this year,” says Bolaji Lawal, head of corporate finance group at Guaranty Trust Bank. The bank led other banks in arranging US$200 million for MTN last year. Now, where will all the needed money come from? “Though Nigeria banks have the capacity to provide huge Naira loans, there is clearly a capacity problem as regards providing foreign denominated loans to operators to fund their CAPEX or operation requirements. We operate in a Naira denominated economy, and as such we can only provide a limited number of loans in foreign exchange. Based on this and other considerations, the GSM operators will continue to seek funding from offshore banks, bilateral and multi-lateral institutions to part-finance their operations,” says Lawal.

Clearly, initial doubt over the growth potential of the industry has given way to by how much the industry would grow and concerns over access and quality of service. That is why the report published early this year on the QoS threshold achieved by the four mobile phone operators rankled a few of them. This was a little distraction from what the operators are busy with. Vmobile Nigeria showed remarkable resilience to overcome the life-threatening experiences it underwent last year, just as MTN has been strong in maintaining its first mover advantage. For sheer scale of ambition and chutzpah, Globacom takes the cake, building a submarine cable linking Nigeria to Europe. Mtel has shown for the umpteenth time that its progress is slowed by being yoked with NITEL.

Progress is not limited to the mobile phone operators. The fixed wireless and wireline phone providers have learnt a lot of service delivery techniques from the mobile phone operators but they have to come up with new strategies to survive, given the take-no-prisoners approach of the major networks. Number of subscribers is now more important than entry price, and that is driving spread and subscriber uptake.

The major growth driver would always be competition. If the NCC maintains its policy of not regulating technology and protecting the smaller operators from being trampled on, a higher number than projected could be signed on this year.